The tablet boom: Great for Wi-Fi, but not for carriers

This time of year, a lot of companies are issuing their “top predictions for 2012,” and most of the trends they forecast are hopelessly obvious: Smartphone sales will skyrocket! or Apple will launch a new iPhone! But Sandvine’s top 5 projections for the new year are always worth a glance; its status as one of the telecom industry’s biggest packet sniffers gives it unique insight into how consumers use their mobile and wireline broadband connections.

This year, Sandvine had a lot of interesting things to say about how tablets will intersect with the wacky world of mobile broadband as well as the continued deterioration of carrier services and the advent of live streamed video. Without further adieu ado, let’s drill into what Sandvine thinks is in store for us in 2012:

95 percent of tablet traffic will be on fixed access networks

That’s a shockingly high number, since tablets are first and foremost mobile computing devices, but as the emergence of new WiFi-only tablets such as the Kindle Fire show, consumers are much less interested than carriers had hoped in the “mobile” half of mobile broadband. Part of the reason is the higher cost of 3G and 4G connected tablets, as well as the higher fees and data caps associated with a mobile connection. But Sandvine said a primary factor is the lack of pooled data options: Consumers simply don’t want to buy separate plans from their tablets and smartphones.

You would think Sandvine’s prediction on the adoption of pooled plans would reverse this trend, but Sandvine thinks most tablet users will continue to look at Wi-Fi rather than expensive mobile broadband services. Consumers may take advantage of these shared data buckets to buy more 3G and 4G tablet and connect them to their operators’ networks, but that doesn’t mean they will use those connections extensively. Consumers may choose to self-police which networks they use to due to the high per-megabyte cost of mobile broadband. A tablet loaded down with video applications can eat through a 2 GB or 5 GB plan in a matter of days, if not hours.

This is good news and bad news for carriers. Pooled plans will encourage more consumers to hook their tablets into their HSPA and LTE networks, but they won’t make money off consumers closely monitoring their data meters. Carriers will get incremental data revenue from tablets, but they won’t suddenly start seeing customers paying $100 a month for data.

The potential for bill shock will increase

Then again, there will be those customers who accidentally spend $100, or even $1,000, in any given month precisely because they aren’t monitoring their data use closely. Tablets can suck down an enormous amount of bandwidth, so as more of those devices make it onto the wireless network, the greater chance more customers are going to complain to their operators about exorbitant bills.

Messaging apps will take a bigger bite of operator revenues

When AT&T removed all remaining tiers in its messaging plans, it practically started begging its customers to look for SMS alternatives. Faced with either committing $20 a month for an unlimited messaging plan or paying the astronomically high rate of 20 cents a message, many consumers have turned to smartphone services like WhatsApp, GroupMe and Beluga, as well as the proprietary platform texting systems iMessage and BlackBerry Messenger. They all use the phone’s data connection rather than the SMS signaling channel, and since a text message uses only the minutest amount of bandwidth, consumers can send thousands of them without making the smallest dent on even the most restrictive data plan.

Operators make bank off of SMS and so any threat to their messaging services is bound to have impact on revenues and profits. That tide has already shifted, according to Sandvine. Its latest study of IP messaging trends in Asia-Pacific markets shows a full 8 percent of consumers in that region are using WhatsApp to bypass operator SMS fees.

Live video will explode

Saying video will be a critical application in 2012 is obvious, but Sandvine believes next year will be the breakout year for live video, seeing it penetrate beyond the broadcast airwaves and cable boxes to Internet-connected TVs, game consoles, smartphones and tablets. Sandvine pointed toward Bell Canada and Rogers, which jointly bought controlling interest in the NBA’s Toronto Raptors and NHL’s Toronto Maple Leafs. The barriers between live sports content and live IP streaming are rapidly deteriorating.

Of course, live streaming places a whole new set of expectations on operators, who can no longer even out the bumps in a stream through extensive buffering. The problem will become particularly acute on mobile networks, which are already cantankerous beasts when it comes to streaming. Solving problems with latency, packet loss and jitter will become all the more crucial.